Passive Income: I invested $5 a day for 1 year and made…

0:00If you save just $5 a day by skipping your daily Starbucks, cutting back on price Uber E's or resisting the temptation to buy new Fortnite skins, and instead, infested it with an average annual return of 10% in 45 years, you'd have nearly $1.6 million. I've shared this idea before, and while many people are amazed at how saving a small amount everyday can grow into a fortune, there's always three common hate comments I get. The first is, I don't want to save, I want to enjoy my money while I'm young. The second, I don't want to be a millionaire when I'm old and gray like you, I want it now. And the third, what kind of investment actually gives me these returns over the long term? After hearing these doubts, time and time again, I thought, why not put it to the test once and for all? That's why I'm kicking off a year long challenge to show you that invest in $5 a day doesn't have to feel like a sacrifice

1:00and can lead to real measurable returns. First, I'll walk you through exactly how I'm setting up my investments, then we'll fast forward to reveal my results one year later. Yes, by the time you're watching this video, a whole year will have passed. So hopefully everything went to plan. Before we start, remember, I'm not a financial advisor. I'm just sharing the knowledge that has allowed me to become a millionaire investor. Right, so step one is to find a platform. For this invest in challenge, I've got a few non-negotiables when it comes to what I'm looking for in a platform. And if you ever want to do something like this yourself, these are the things you'll want to keep in mind too. Let's break them down. The first thing of course is low fees because you don't want your potential profits eaten up by unnecessary charges. The next thing is a beginner friendly interface. Although I'm confident with complicated investing terms, I know most beginners that want to try out this challenge will be put off if it looks too confusing.

2:03So we need something that's simple to understand. Security is such an important one. What's the point of investing if my money isn't safe? So I'll need a platform that is fully protected by the financial services compensation scheme. This compensates you for up to 85,000 pounds in the UK, in case something happens to the platform. However, bear in mind, this protection doesn't protect you from investment losses. We also need a platform that accepts pretty low minimum deposits because this is of course a five dollar a day challenge. Next we need some kind of automatic investing feature. As there's no way I'm going to be remembering to invest five dollars every single day without automating it. You might be better at remembering me, but my boomer brain is getting pretty old. Finally, we'll need access to fractional shares. This will allow us to invest in high price stocks without needing to fork out hundreds of dollars to buy an entire share upfront. For example, Apple is as of August 2023

3:06trading at around $178 per share, which clearly doesn't work with our five dollars a day budget. But with fractional shares, we can invest any amount we want, no matter how small. There are other features you might prioritize. However, these things are mine non-negotiables. Now, if you're doing this challenge too, feel free to use whatever platform has these features. I've used a lot of investing platforms in my lifetime and one of my favorites is trading two one two as it ticks all of these boxes. So that's the platform I'm going to be using for this challenge. Right, let's move on to step two, which is to open and fund an account. When it comes to this step, there's one key decision that many people overlook, a decision that can make or break your long term results. And if you're taking on the five dollars a day challenge like I am, this choice becomes even more critical. This is because the type of account you choose will determine how much of your profits

4:06you actually end up keeping. Let me explain. There are two main types of accounts we need to consider. For now, let's call them account A and account B. Account B. Now, let's imagine we've got $2,000 to invest. We'll split it equally between both boxes. So $1,000 goes into account A and $1,000 goes into account B. At first, everything looks the same. Both accounts have the same amount of money invested, but here's where things start to change. When you use account A, your profits aren't entirely yours to keep and that's because of the dreaded tax man. First, he takes a slice of your dividend earnings. Dividends are like a reward. Companies give their shareholders. Now, not all companies pay them, but many do. How much the tax man takes depends on your income and tax bracket. So the more you earn, the bigger the slice he takes. Next, he takes even more for capital gains tax.

5:07This happens when you sell an investment for more than you paid for it. In the UK, capital gains tax is typically 10 to 20%. In the US, long-term capital gains tax rates range from 0 to 20% based on your income level. Now, what about the money in account B? Well, this account has special protections that stop the tax man from reaching in and taking your profits. Everything you make here is yours to keep. That's because account B is known as a tax advantage to account. Meanwhile, account A is just a general investing account. In my humble opinion, you shouldn't even be looking at a general investing account until you've fully taken advantage of everything a tax advantage account has to offer. So how do you do that? Well, it depends on where you live. In the UK, our tax advantage accounts are called stocks and shares ISIS. And in the US, they're known as Rofa arrays. Both of these special accounts come with incredible tax benefits, but there are a few things to keep in mind.

6:08In the UK, you can contribute up to 20,000 pounds per year into an Issa. In the US, Rofa array contributions are capped at $6,500 each year, or $7,500 if you're over 50. For most people, these limits are plenty, allowing you to build your future while still covering living expenses. The Issa allows you to withdraw money at any time. Tax-free, which makes it very flexible. So while a general investing account isn't necessarily a bad option, it often falls short when it comes to maximizing your money. Of course, if a tax advantage account isn't available where you live, you'll have no other choice, but to use Option 8, a general investing account. I'm gonna use Option B, a stocks and shares Issa, because when we pull the money out of this box at the end of the year, we wanna keep as much as possible. As I mentioned earlier, I used trading two and two all the time, and already have an account, but for this challenge, I wanted to show you the process of starting fresh.

7:11That's why I've asked my son Curtis to step in and take on the challenge using his account. If you also want to set up an account and join in with the challenge, just head over to their website or download their app from the app store. The set up process is pretty straightforward. The only part you might need a bit of clarification on is choosing the right account type. You'll be met with four options like this. At the top is the general investing account we spoke about earlier. Underneath is the CFD account for short term trading, which we don't need to worry about. At the bottom is the cash Issa. And right here is the stocks Issa. This is the account odd open if I were you. Now, assuming you've set up your account, head over to this tab and select UsePromo code and enter TILB, and you'll get a free fractional share where a fact to 100 pound when you fund your account. Now, I know this sounds too good to be true,

8:11but they're offering this because I reached out to them to see if they'd be interested in sponsoring this portion of the video and they agreed. So next, let's fund the account. Click this button here. You'll see a few options including instant bank transfer, normal bank transfer, card or Google Pay. If you're using the iPhone app, I believe you'd also have the option of Apple Pay as well. I'm gonna go with instant bank transfer and deposit 35 pound from my son's bank account. As that will cover us enough to invest five pound a day for the next seven days. Now, you don't need to deposit for an entire week ahead in one go. This is just the way I'm choosing to do it. And yes, I know the title says $5 a day, but I'm in the UK, so I'm putting five pound in, which is actually just a little bit more. The most common mistake I see people make when investing is assuming that once they put some money into an account like this, their money will automatically start to grow. Let me make one thing very clear.

9:12This box only protects your money from tax. It doesn't actually invest it for you. That's why step three is to pick some investments. This is all about deciding what actually goes into the box. So we could fill it with individual stocks like Amazon, Meta, Apple, Tesla, and Nvidia. But to be honest, while these are great companies putting all your money into a handful of individual stocks can be really risky. If one of these companies doesn't perform well, it could drag down your entire portfolio. That's because your money is tied up in just a few companies and that increases your risk. That's why for this challenge, I'm using a different strategy. You might have guessed it already. It's called index fund investing. This will give us exposure to loads of different companies without all the stress of picking individual stocks and praying for a winner. Index funds can hold shares from hundreds,

10:13sometimes even thousands of different companies at once. This makes it easy to invest in up all your bunch of companies all at the same time, making your portfolio more diversified. Now here's the best part. What makes this even more powerful is that it's going right inside by tax advantage to the count. So not only do I get the benefits of diversification and low cost, but I also get to avoid paying taxes on dividends or capital gains while it grows. This is perfect for my $5 per day challenge. Of course, it's important to remember that stocks can go up as well as down and your capital is always at risk when investing. However, if you choose to invest in an index fund, like the S&P 500, which tracks the performance of the top publicly traded companies in the United States, it's worth noting that historically, no one has lost money when they've bought and held for over 20 years. Past performance isn't a guarantee of future results, but long-term investing in diversified funds like this

11:16can help reduce risk compared to individual stocks. Let's head over to trade in 202 and set this up. To the left, you can see this option to create a pie. Once you click it, it gives you some different options like copy and model pies, looking at other people's pies in the community and creating your own custom pie. A pie is just a fancy way of showing you how your investments are divided between different stocks. For example, if you had $100 and split it equally between four individual stocks, your pie would have four equal slices of 25% each. We're gonna go with the custom pie option and click add instruments. I'm gonna search for a simple Vanguard S&P 500 index fund. As you can see, there are a couple of different options. One has ACC and brackets, and that stands for accumulation, meaning that all your dividends are reinvested back into your investments. The other option looks the same, but has DIST in brackets at the end,

12:19which is short for distribution. This second option means that you're given a dividend rather than then being automatically reinvested into your account. So for me, I want this challenge to be as easy as possible. So I'll be choosing the accumulation one now. I'm gonna click add to pie. All right, so we've got our account set up and decided what to invest in, but here comes the tedious part. Invest in a fiver every single day. Honestly, I think a lot of the hate towards this challenge comes from people imagining the effort it takes to do this every day, but the truth is, it really doesn't have to be that hard. That's why step four is to set up auto investing. Now, this feature isn't just great for the $5 challenge, it's essential for any investor, no matter how much you're putting in. This is because it takes your emotions out of investing and leverages the power of dollar cost averaging. Let me explain. The reality of the stock market is that it's completely unpredictable.

13:19It doesn't just move in one direction. Sometimes the market will be going up. Other days, it will be moving sideways. And then there are times it'll be going down. When the market is down, your money actually buys more shares because prices are lower. For example, my $5 stretches further. Let me pick up more shares at a discount. And when the market is up, my $5 buys fewer shares because prices are higher. The idea is that over time, these ups and downs balance each other out, which is the magic of dollar cost averaging. It's been such a reliable and stress-free strategy for me because it takes the pressure off trying to time the market perfectly. For this challenge, I'll be using this exact strategy by investing the same amount every single day. And if you don't want to do it daily, you can invest monthly and still see the same results. It's entirely up to you. Let's go back to trading 2.1.2 and click next. This then gives us the option to either choose to invest manually or use the auto-invest feature.

14:20We're of course going to select auto-invest and then click next. Now we have these three sliders we can play around with. The first one is our initial deposit. This is the money we're going to be investing right away. So I'm going to set this to five pounds. Next, we have the investment frequency. As you can see, you can do this every two months, monthly, every two weeks, weekly. But we're going to select the daily option and press update. And then we're going to change this to five pound two. Finally, let's set the years to one. And as you can see, there's a call value projection graph at the top, which shows us what we can expect to make in a year based on historical data. 1.97, 1,000 pounds may not seem super impressive when we're going to be putting in 1.8K. But if you move that slider all the way to 40 years, look how compound interest takes over. This value projection says our little five pound a day investment could be worth 5.52 million

15:23from an investment of only 73,000 pounds. Of course, this is all estimations. And if I were you, I'll take this with a grain of salt. As nowhere knows what the market is going to do long term. However, playing around with these compound interest value projections is very motivational. So let's bring it back to one year and click next. Now we get the chance to name our investment. So I'm going to call it coffee a day and then click next. Now it's time to fund the pie. So let's click this. And as we've already funded the trading two one to account, we can choose the free funds option. This isn't free money. It just takes cash from your balance on trading two and two. So as long as we top this account up every now and again, then the daily investments should go through. Then I just need to press confirm and boom. That's all set up. So a year from now, hope I'm still alive. I'll catch up with you.

16:27Right, it's time to check out the results. I know I'm about five months late on this. That's how good the auto invest feature is. You just forget it's invested in the background. But trust me, the results are worth the wait. They're really interesting. I started this challenge back in August 2023. And after the first month, I was up two pounds and 37 pence, which was a 1.5% return, not bad, but then September came along. And things didn't go quite so well. I was actually sitting at a loss of 79 pence, which was a minus 0.5% return. This right here is why so many people give up on investing in the first two months. I had almost nothing to show for my consistency. It's no wonder people decide to pull their money out when they don't see immediate results. But I was determined to stick with my dollar cost average in strategy. And I'm so glad I did because things really started

17:28to turn around. Fast forward six months. And I was up 83 pounds and 70 pence, which is an 18.2% return, not too shabby. And then by 12 months, I'd made 161 pounds and 34 pence in profit with an 18.1% return. That's where the auto investing feature stopped. But I've continued tracking the growth since then. Now let's jump to the day. This is where it gets a little bit crazy. In total, I've invested 1,505 pounds. But my investment is now sitting at 1,972 pounds. That means I've made a profit of 467 pounds and three pence, which we can convert to dollars. And that works out at 576 dollars and 59 cents, which is a staggering 43.8% rate of return. Now, this is proof that time in the market

18:29beats timing the market. If I had panicked and pulled my money out after losing some in a second month or stopped the challenge altogether, I'd never have reached this point, even I can dreamt of results like this. It's down to the wild year the stock market has had. However, it's important to note that these results are not typical and past performance doesn't guarantee future results. I'm thinking about continuing this challenge long term just to see how much it could grow. If that's something you'd like to see, let me know in the comments and I'll make another update video in the future. If you want to learn more about how I pick my stocks in, I'm gonna leave that video right up there, but don't click on it, Josh, here. Make sure to subscribe if you wanna grow your wealth. Okay, I'll see you over there.